In what is being heralded as one of the biggest ever victories for the cryptocurrency community, the Internal Revenue Service has decided to considerably limit the scope of its investigation into customers of one of the most popular cryptocurrency exchanges in the country.
The Story So Far
The latest development in this ongoing battle between Coinbase and the IRS brings as much surprise as it brings relief in the wake of Bitcoin’s slide into Bear Market territory. Not even the most optimistic supporters of the digital currency would have predicted this outcome after the agency had demanded that Coinbase produce a comprehensive list detailing all customer account activity from 2013 to 2015. This period oversaw an almost 8400% increase in the value of Bitcoin from $13 to $1100 and red flags were raised at IRS when only 802 people declared profits or losses arising from their transactions.
IRS Backs Down
The IRS had recently given the indication that it would narrow its request down to specifically those items that constituted unreported income. This news scared a large user base that faced investigation for merely failing to disclose they made transactions involving a small amount of Bitcoin. The tax agency now claims that it only requires details about user accounts that engaged in “at least the equivalent of $20,000 in any one transaction type (buy, sell, send, or receive) in any one year during the 2013-15 period.”
The court filing, however, does have a clause that states:
The United States reserves the right for the Internal Revenue Service to issue summonses in individual examinations of Coinbase users for the information that it no longer seeks in this proceeding.
Modifications in the “Notice of Narrowed Summons Request for Enforcement”
The modified summons request presented by the IRS eliminates some of its previous requests. Most notably, it no longer seeks payment information and security settings for the accounts. It also does not request powers of attorney, letters of wishes, or corporate minutes associated with third party access, control, and transactional approval authority anymore. Finally, it has severely restricted the scope of correspondence requested between Coinbase and its users to just opening, closing, and transaction activities, a huge step away from its previously all-encompassing request that infuriated even some Congress members.
The new summons uses vague languages at times:
The United States is not seeking records for certain identified users who are known to the Internal Revenue Service.
This has been mocked on social media as a ridiculous attempt to sugarcoat the rich and powerful elite class of the country, such as bankers and politicians.
The Fight For User Privacy and Anonymity
As previously reported, the tax agency has faced unprecedented pressure to scale back its probe to obtain the information of over 1.5 million Coinbase user accounts from not just the company and its users but also from the Congress and the cryptocurrency community. It was a couple of anonymous Coinbase users who made the first move in May to prevent the execution of the IRS summons.It
It is not yet known whether they plan to withdraw their lawsuit or push the IRS to further limit the scope of their summons. Coinbase claims it will also join the lawsuit if the IRS fails to pull back. Both the agency and the company have declined to make any statements in the wake of the IRS’s new decision.
This is a massive win for the crypto-community and should be cherished. It was refreshing to see some higher ups in the government actually stand up for people’s right to privacy for a change and question the IRS’s clear overreach. The tremendous outpour of support from different strata of the public was overwhelming and crucial in cornering the IRS and forcing them to yield to the demands of the masses over the illogical and almost tyrannical fiscal policies of the government.
There will be many more hurdles in this journey, but if more users of the technology come together and pull their weight like they did this time, no obstacle is too big to overcome. The value of Bitcoin didn’t show much volatility in the aftermath of this new development and traded at around $2400.
What do you think about the decision made by the IRS to limit the scope of its investigation? Do cryptocurrencies need more regulation or less? Do you want to see the threat of the lawsuit be used to pressurize the tax agency into backing down even further? Let us know by commenting below!
Images courtesy of AdobeStock, IRS, Coinbase, Public Domain Pictures